Europe

Western and Eastern Europe is forecast to see minimal or negative GDP growth in the 4th Q of 2022:

Look for European energy (oil/natural gas/electricity) prices to increase dramatically in the coming winter months. The Euro Zones economies have been especially devastated by the ongoing war in Ukraine, the resulting natural gas shortages, and energy price spikes have really damaged most economies across Europe. 

The value of the Euro has been progressively declining against the US dollar for the best part of 6 months. Some economists are projecting that the Euro could fall between 0.90 and 0.95 to the US dollar in the next 3 months. This, of course, will impact inflation in Europe and could be the catalyst to increase construction-related materials.

The UK pound fell to a record low against the US dollar on 9/26/2022 on growing concerns regarding the stability of the UK finances. This could further increase inflation, oil, and many imported items that are priced in US dollars. The UK pound has fallen by 8.5% against the US dollar in the last 3 months.

Construction-related inflation in the UK is forecast to increase from 10.3% to 10.7% in the 1st Q of 2023. The Euro Zone country’s salaries and construction hourly rates are forecast to increase by 2.9% to 3.3% in 2023.

The UK is experiencing a significant decrease in activity in civil engineering-related work. House building and commercial construction work, such as hotels, offices, warehouses, and shopping malls have also experienced a slowdown in the last two months.

The rising cost of construction materials and worries over the likelihood of a full-blown recession has resulted in a loss of confidence throughout the UK construction sector.

The forecast for construction inflation in the Euro Zone is 9.4% to 9.9%, in Belgium, it is 10.2% to 10.7%, Spain is forecast to see 11.2% to 11.7%, and Italy is forecast to see inflation in the 10.7% to 11.2% range in the next 3 months.

Inflation/escalation is surging in some northern European countries. Estonia, Germany, Latvia, Lithuania, Denmark, and Poland are seeing rates ranging between 7.5% and 10%, energy prices have risen by as much as 35% in the last 6 months, and the really cold winter months are still in front of these countries.

European economies and their construction sector will face a really challenging period in the months ahead.

The average cost of a liter of petrol in the UK has risen by more than 40% in the last 3 months. Will fuel prices keep escalating, most probably, because other European countries have experienced similar increases. 

In a sign that the Russia – Ukraine conflict is really dangerous, Scandinavian, historically neutral countries, Sweden and Finland, are both now contemplating/exploring joining NATO military pact.